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Lecture 4-5

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40 Questions

What is the primary distinction between business markets and consumer markets?

Business markets have fewer, larger buyers than consumer markets

What characterizes the supplier-customer relationships in business markets?

Close, with suppliers expected to customize offerings

What is a key feature of organizational buying behavior?

Trained purchase agents follow organizational policies

What is a key difference between B2B and B2C purchases?

B2B purchases involve multiple buying influences, while B2C purchases do not

What is a characteristic of the sales process in business markets?

Multiple sales calls are often required to close a deal

What is the primary factor that influences the demand in B2B markets?

Demand in B2C markets

What is the term for a buying situation in which a purchase department reorders supplies on a routine basis?

Straight rebuy

What is the primary goal of business buyers in the purchasing process?

To seek the highest benefit package

What is the first stage in the buying process according to the buy-grid framework?

Problem recognition

What is the term for a website that connects invited groups of suppliers and partners on the web?

Private exchange

Which of the following is a drawback of online business buying?

Erosion of supplier-buyer loyalty

What do marketers emphasize to counter requests for lower prices?

The life-cycle cost of using their products are lower compared to competitors

What is the purpose of a blanket contract?

To establish a long-term relationship with agreed prices

What is the acronym PEEST short for?

Political, Economic, Ecological, Social, Technological

What is the main purpose of business legislation?

To protect companies from unfair competition

Which type of marketing program focuses on getting as close and personally relevant to consumers as possible?

Local Marketing

What is the term for dividing buyers into groups based on their personality traits, lifestyle, or values?

Psychographic Segmentation

Which of the following is a base for segmenting business markets?

Demographic variables

What is the primary goal of market targeting?

To decide on how many and which market segments to target

What is the primary benefit of niche marketing, according to the text?

It allows firms to be the 'large fish in the small pool'

What is the term for market segmentation based on when buyers develop a need, make a purchase, or use a market offering?

Behavioral Segmentation

What is the purpose of points-of-parity in positioning?

To negate competitors' points-of-difference

What is the term for the act of designing a company's market offering and image to occupy a distinctive place in the minds of the target market?

Positioning

What is the term for customization that allows customers to design their own market offerings?

Customization

What is the primary criterion for a market segment to be meaningful?

All of the above

What is the main implication of population growth on business practice?

A growing population does not always imply a growing market, unless sufficient purchase power exists

What is the primary driver of the 'intention-behavior gap' in green consumption?

Greenwashing, deceptively persuading the public that their products are environmentally friendly

What is the primary characteristic of 'core cultural values'?

Beliefs that are passed on from parents to children and reinforced through major social institutions

What is the primary advantage of 'mass marketing'?

It creates the largest potential market, leading to lower costs and lower prices or higher margins

What is the primary goal of 'segment group marketing'?

To identify segments and decide which one(s) to target

What percentage of dissatisfied customers actually complain about their purchase?

5%

What is the market offering quality dimension based on?

Customer-perceived quality minus customer-perceived price

What is the primary goal of customer profitability analysis?

To identify ways to improve the value of a company's customer base

What is the primary purpose of personalized marketing in building customer loyalty?

To present new, tailor-made offerings to customers based on collected data

What is the result of handling customer complaints satisfactorily, according to the text?

50-75% of customers continue doing business with the brand

What is the primary purpose of repositioning in marketing?

To adjust a brand's image or offerings in response to changes in the market

What is the main goal of a cost leadership strategy?

To offer a product at a lower price than competitors

What is customer-perceived value?

The difference between a product's benefits and costs as perceived by customers

What is the primary goal of measuring customer satisfaction?

To identify areas for improvement in a company's offerings and operations

What is the link between customer satisfaction and loyalty?

Highly satisfied customers are more likely to be loyal

Study Notes

Consumer Markets

  • Incomes:
    • Very low, mostly low, very low and very high, low, medium and high, or mainly medium incomes
  • Savings, debts, and credits:
    • Consumers with the same income can have different living standards depending on their savings, debts, and needs (health, childcare, transport)
  • Ecological/Physical Environment:
    • Companies creating environmental solutions have a competitive advantage
    • Intention-behavior gap in green consumption, and some companies engage in greenwashing
  • Social, Cultural, and Demographic Environment:
    • Population growth has implications for business practice
    • Age mix of populations affects demand for certain products (e.g., toys for younger, medical services for older)
    • Cohorts: groups of individuals with similar values, preferences, and purchase patterns shaped by "defining moments"
    • Diversity of marketing: countries vary in composition (ethnicity, religion, etc.)
    • Educational backgrounds shape interests, preferences, and purchase patterns
    • Household patterns: traditional households, single households, and changing family structures

Technological Environment

  • One of the most dramatic forces shaping consumers' lives and challenging for firms
  • New technologies influence the economy's growth rate and create long-term consequences that are difficult to forecast

Marketing Segmentation and Targeting

  • Mass marketing: one offering for all, creating the largest potential market, lower costs, and lower prices or higher margins
  • Micromarketing: alternative to mass marketing, more common in today's competitive landscape, with four levels: segments, niches, local areas, and individuals
  • Segment group marketing: grouping customers based on similar needs and wants, enhancing the chance to positively differentiate offerings from competitors
  • Niche marketing: targeting specific segments or niches with tailored products or services

Business Markets

  • Organizational buying: decision-making process by which formal organizations establish the need for products and services
  • Business market: all organizations that acquire goods and services used in the production of other goods and services sold, rented, or supplied to others
  • Fewer, larger buyers than in consumer markets, with often a symbiotic relationship between suppliers and buyers
  • Professional purchasing: trained purchase agents follow organizational purchase policies, constraints, and requirements
  • Multiple buying influences: more people involved in and influencing purchase decisions in B2B than in B2C settings

Buying Process

  • Problem recognition: someone in the company recognizes a problem or need that can be met by acquiring a product or service
  • General need description: determining the general characteristics and required quantity of the needed item
  • Product specification: developing the technical specifications of the item
  • Supplier search: identifying appropriate suppliers through various means
  • Proposal solicitation: inviting qualified suppliers to submit proposals
  • Supplier selection: specifying desired supplier attributes and evaluating proposals
  • Order-routine specification: negotiating the final order and delivery details
  • Performance review: periodically reviewing the performance of the chosen supplier

Marketing Environment

  • Company's environment: global competition, faster information and communication flow, increased business complexity, and rapidly changing consumer needs and wants
  • Marketing environment: microenvironment (customers, suppliers, distributors, agencies, and competitors) and macroenvironment (trends and technological advancements, social, cultural, political, ecological, and legal forces)
  • PEEST: acronym for the five overall forces: political, economic, ecological, social, and technological

Political/Legal Environment

  • Laws, government agencies, and groups influencing and limiting organizations and individuals
  • Trends: increased business legislation and growth of special interest groups

Economic Environment

  • Purchase power depends on income levels, prices, savings, debts, and credit availability
  • Trends that influence purchase power can have a powerful impact on businesses

Market Targeting and Positioning

  • Market targeting: selecting the most attractive market segments to target
  • Effective segmentation criteria: measurable, substantial, accessible, differentiable, and actionable
  • Positioning: designing the company's market offering and image to occupy a distinctive place in the target market
  • Points-of-parity (POPs): attributes or benefits that are not unique to a brand
  • Points-of-difference (PODs): attributes or benefits that are strongly associated with a brand### Market Segmentation
  • Niche markets: small in volume but have attractive profit and growth potential; marketers seek to be the "large fish in the small pool" by providing the best customer-perceived value.
  • Local marketing: tailoring marketing programs to target specific local groups, which can increase manufacturing costs and reduce profitability, but allows firms to respond to local requirements more effectively.
  • Individual marketing: customized marketing where customers become integral to the market offering and design processes, with offerings developed to meet individual needs.

Bases for Segmenting Consumer Markets

  • Two broad groups of variables: descriptive characteristics and behavioral considerations.
  • Geographic segmentation: dividing markets into different geographic units, considering regional, rural, and urban characteristics.
  • Demographic segmentation: dividing markets based on age, life cycle stage, gender, generation, income, and social status.

Demographic Segmentation

  • Age and life cycle stage: many brands offer product lines targeting children, adults, and older consumers, and sometimes even within these age groups.
  • Life stage: defines people's major concerns and creates new market segments and requirements in existing markets.
  • Gender: differences based on biology and socialization influence marketers' strategic decisions.
  • Generation: may have similar purchase preferences based on shared experiences and values.
  • Income: established segmentation practice in several product and service categories.
  • Social status: classified using criteria such as profession, property, education, and income, influencing purchase preferences.

Psychographic Segmentation

  • Dividing buyers into groups based on personality traits, lifestyle, or values.
  • Psychographic profiles are developed based on AIO factors, describing individual lifestyles: activities, interests, and opinions.

Behavioral Segmentation

  • Occasions: distinguishing buyers according to when they develop a need, make a purchase, or use a market offering.
  • Repositioning: companies must be prepared to make proactive and reactive positioning decisions depending on market conditions, such as when a competitor launches an offering that is as good as or better than the own brand.

Differentiation Strategies

  • Cost leadership: developing and sustaining cost/efficiency gains by offering a acceptable substitute to competing offerings from a reduced cost base.
  • Distinctive superior quality: creating strong customer-perceived value for offerings through the right quality attributes and transactional attributes.
  • Differentiation strategies: attributes, benefits, or values, personnel, channel, and image differentiation.

Customer Value, Satisfaction, and Loyalty

  • Customer-perceived value: the difference between potential customers' evaluations of all the benefits and costs of a company's offering and the perceived alternatives.
  • Customer satisfaction: a person's feeling of pleasure or disappointment resulting from comparing a product or service's perceived performance to expectations.
  • Highly satisfied customers are more likely to be loyal and buy more from the company, while being less price sensitive and costing less to serve.

Monitoring Satisfaction

  • Periodic surveys, direct questions about customer satisfaction, repurchase, and word-of-mouth.
  • Customer loss rate, mystery shoppers, and managers examining sales situations to identify weak and strong points.
  • Monitoring competitors' performance, customer lifetime analysis, and dealing with customer complaints.

Dealing with Customer Complaints

  • About 25% of the time, customers are dissatisfied with the purchase, but they only complain on 5% of cases.
  • Complaining customers: 50-75% continue doing business with a brand if it handles the complaint satisfactorily, while almost all continue doing business if the complaint was resolved quickly.
  • Recommended to make it easy to complain, handle complaints quickly, have empathetic staff, and not blame the customer.

Market Offering Quality Dimension

  • Customer-perceived quality – customer-perceived price = customer-perceived value.
  • Quality: the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Maximizing Customer Lifetime Value

  • The most profitable customers generate the majority of profits, whereas the least profitable customers can substantially reduce profits.
  • Customer profitability analysis: revenue exceeds costs for attracting, selling, and servicing customers over time.
  • Ways to improve the value of a company's customer base: reduce customer defection, extend existing and future customer relationships, enhance growth potential, make low-profit customers more profitable, and pay more attention to high-value customers.

Test your understanding of business markets, organizational buying, and the changing marketing environment. Learn about the decision-making process in formal organizations and how they evaluate alternative brands and suppliers.

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